Government securities prices are expected to be steady and range-bound this week on the back of easy liquidity in the call money market. Dealers said the securities market could see some nervousness due to the tough stance taken by the Indian leaders on the US clubbing the country with Pakistan, and this would exert downward pressure on prices.
"Government securities prices should not see any heavy upward or downward movement this week. If there are no major adverse developments, prices could move up by 20-30 paise across the board in the run-up to the review of the monetary and credit policy on October 22," a dealer with a private sector bank said.
Dealers expect a rate cut in the administered interest rates, especially in the Reserve Bank of India (RBI) relief bonds by 50 basis points, which would be a strong signal for lowering of bond yields.
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Securities prices have already factored in a 50 basis points cut in the bank rate and the yield on the benchmark 10-year paper is likely to be in the 9.00-9.20 per cent range this week, a dealer with a private sector bank said.
With the US ready to strike Afghanistan any time now and the Indian leaders asserting themselves, players are expected to shift from the long-tenor government securities to the medium- and the short-tenor securities as any adverse development generally affects long-end securities more.
At present, the market is witnessing a lot of activity in the 11.50 per cent 2011-, 11.03 per cent 2012- and the 11.40 per cent 2008-papers, which are highly liquid medium-tenor papers and perceived as safe bets.